China Rongsheng reports plunging orders, revenues and earnings

AUGUST 22, 2012 — China’s largest privately owned shipbuilder, China Rongsheng Heavy Industries, saw revenues fall by 37.2 percent in the six months ended June 30, while earnings fell by 82.3 percent, according to its latest interim results announcement.

Shipbuilding accounted for 96.9 percent of revenues in the period. Though the company is trying to diversify its activities, their contribution to revenues in the period were just 0.4 percent from offshore engineering, 1.2 percent from marine engine building and 1.2 percent from engineering machinery.

The company booked orders for only two new vessels in the period, with a total contract value of $55.6 million, compared with orders for 24 vessels, worth $1.08 billion, booked in the comparable period last year. It says that in the “adverse market environment” facing world shipbuilding, it “adopted a defensive sales strategy by avoiding low-price orders or orders with unfavorable payment terms while moving towards the high end of the value chain.”

The company obtained two non-binding letters of intent to build a drilling barge and a drilling rig for a Singaporean client in the period, but the contracts have not yet taken effect. It says it is “actively following high-end offshore projects including the construction of heavy-lift vessels, drilling platforms, floating production storage and offloading units, and LNG carriers” for customers in Malaysia, China, Europe and the U.S. It says it is in the bidding process for several projects and is waiting for customers’ feedback.

China Rongsheng had 6,950 employees at the end of June, down from 7,046 at the same time last year. It says the slight decrease was mainly in relation to the market downturn. It says it is proactively setting up an employment system of “Survival of the Fittest” and offering competitive remuneration packages to employees.

Rongsheng’s backlog at June 30, 2012, consisted of 101 vessels, representing a total volume of 15.1 million DWT with a total contract value of $5.9 billion. It included 48 Panamax bulk carriers, 19 very large ore carriers (“VLOCs”), 23 Suezmax crude oil tankers, one Panamax crude oil tanker, two very large crude oil carriers (“VLCCs”), four 6,500 TEU containerships and four 7,000-TEU containerships. All the vessels on the order book are contracted for delivery from 2012 to 2015.

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